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Current State of World Alternative
Current State of World Alternative
Problem statement. There are two most serious global problems nowadays –
energy security and ecology. Their actuality is conditioned by the growing role of the
environment on efficient functioning of national economies under tightening com-
petition at the markets of resources and products.
Ecological problems caused by fossil fuels use are intensifying day by day.
Therefore, application of alternative motor fuels, including renewable ones, streng-
thens energy security of all states, promotes national competitiveness and improves
overall ecological situation.
Countries of the world have different reserves of fossil resources, climatic condi-
tions, legislation, level of economy and science development. These factors impact
the alternative motor fuels application, their types and scope of use.
It is important to study the prospective ways of alternative motor fuels use, reveal
the general patterns at this market and consider the world best practices for Ukraine.
Recent research and publication analysis. Theoretical and practical aspects of
alternative motor fuels market are explored in the works of foreign and domestic
authors. J. Bell (1999) and E. Toffler (1999) studied general tendency of society deve-
lopment in its relation to energy resources use, including renewable ones. The impact
1
Mykolayiv National Agrarian University, Ukraine.
2
Odesa I.I. Mechnikov National University, Ukraine.
of biodiesel on the market situation was studied by M. Kobets (2007); the influence of
biofuels on the planet’s finite supply of fossil fuels and sustainable future were studied
by L.P. Koh and J. Ghazoul (2008); the criteria for comparing the efficiency of ener-
gy resources and technologies were studied by C.A.S. Hall and C.J. Clevelend (2005),
R. Heinberg (2009), A.N. Goloskokov (2011) and many others.
However, this issue is still insufficiently studied and requires further scientific
research.
The research objectives are to identify specific national aspects of alternative
motor fuels market; to develop scientific and practical recommendations for its deve-
lopment in Ukraine.
Methodology. Methodological bases for this study are the research developments
of domestic and foreign scientists, legal acts, and statistical data. For the study of the
effectiveness of different types of fuels economic mathematical modelling is applied.
To make a decision on the use of fuel it is necessary to have information not only
on their physical and chemical properties, but also their economic characteristics.
One of them is the cost of fuel energy. Estimation of the effectiveness of different
kinds of fuels depends on the values determined as follows:
(1)
where Fpr – the price of fuel, USD/m3; Q – lower heating value of fuel, MJ/kg; r –
fuel density, t/m3.
In the case of mixed fuel the cost of energy is determined as follows:
(2)
where Fprі – the price of the i-th component of the fuel, USD/m3; Qі – lower heat-
ing value of the i-th component of the fuel, MJ/kg; rі – the density of the i-th com-
ponent of the fuel, t/m3; n – the number of components; gі – part of the i-th com-
ponent of the fuel.
Efficiency of internal combustion engine depends on a number of factors,
including the type of a fuel used. Thus, efficiency of diesel engine D-245.12S at max-
imum torque when running on diesel fuel is 37.5%, and under the mixture consisting
of 40% rapeseed oil and 60% diesel fuel – 37.2%.
Studies for spark-ignition brand ZMZ 405.2 have shown the following. The
highest efficiency is observed when an engine operates on gasoline and propane –
33.7%. When an engine is running on methane the efficiency drops to 31%. The max-
imum efficiency for biogas does not exceed 29%.
Therefore, it is advisable to determine the cost of energy that will be used for use-
ful work
(3)
(4)
where Qb, Qo – lower heat value of biofuels and petroleum fuel accordingly, MJ/kg;
b, o – density, respectively, of biofuels and petroleum, t/m3; Vb – volume of biofu-
el, m3; Vo – volume of petroleum fuel, m3.
It is necessary to take into account the selling of by-products. For biodiesel these
are cake and glycerin, for ethanol – carbon dioxide and dry fodder. The sale of these
products allows getting additional funding for the purchase of petroleum fuel. This
can improve the value of biofuels production expediency.
In this case the equivalent volume of biofuels will be determined as follows
(5)
(6)
(7)
Alternative motor fuels. Conventional those are fuels derived from petroleum.
Alternative fuels are non-petroleum fuels. Which use can improve both environmen-
tal and economic indicators of the related activities.
The first group includes petroleum products such as gasoline and diesel fuel
(Figure 1).
Alternative energy sources are divided into renewable and non-renewable.
As a renewable resource for motor fuels production can be used fats, biomass,
agricultural, industrial and household wastes etc. Non-renewable fuels include natu-
ral gas, liquefied petroleum gas (LPG), gas condensate, synthetic fuels derived from
coal and oil shale, dimethyl ether manufactured from natural gas etc.
MOTOR FUELS
conventional alternative
non-renewable renewable
Methyl esters of
Gas condensate
Dimethyl ether
petroleum gas
vegetable oils
Vegetable oil
Natural gas
Diesel fuel
Liquefied
Synfuels
Syngas
Biogas
Spirits
Petrol
1,30 1,23
1,20
1,10
0,996
Criterion
1,00
0,862 0,849
0,90 0,83
0,798
0,756
0,80
0,668 0,69
0,658
0,644
0,70
0,60
28.05.2005
10.10.2006
22.02.2008
06.07.2009
18.11.2010
01.04.2012
14.08.2013
27.12.2014
10.05.2016
Figure 2. History of the criterion K for biodiesel in Ukraine, developed
by the authors using (Dubrovin et al., 2004 and market prices)
Table 1. Criterion for bioethanol production in Ukraine, developed
by the authors using (Dubrovin et al., 2004 and market prices)
Raw material Output of ethanol from crop, m3t-1 Mark of petrol -95
Corn 0.38 1.37
Sugar beet 0.085 1.25
Wheat 0.35 1.14
With regard to the EU countries, at the present level of motor fuel prices,
biodiesel production can be economically feasible if the rapeseed price is no more
than 480 EUR/t. The calculations were made by using formula (7). In some countries
affected by high prices for conventional fuel biofuel production is impossible due to
climatic conditions.
Biofuels production. Biofuels production is mostly developed in the countries
with favorable climatic conditions, agricultural efficiency and appropriate govern-
ment support. Thus, the average yield of bioenergy raw materials for bioethanol pro-
duction is, t/ha: sugar cane (Brazil) – 77; corn (US) – 10.8; maize (EU) – 6.94;
Sugar beet – 67.85 (Crop Monitoring in Europe, 2012; Perspectivy…, 2012). This
allows producing the following volumes of bioethanol from l/ha: Brazil – 5621; USA
– 4320; EU (corn) – 2776; EU (sugar beet) – 7463. Due to low production cost of
sugarcane bioethanol production is more economically attractive in Brazil. In the EU
countries, despite high bioethanol yield per unit area, due to relatively high produc-
tion cost of bioenergy raw materials, bioethanol production is less competitive in
comparison with Brazil.
The situation in biodiesel production is somewhat different. The average yield of
rapeseed in the EU is 3.0 t/ha. High rates have the following countries, t/ha: Belgium
– 4.11; Germany – 3.66; United Kingdom – 3.49; Denmark – 3.54 (Crop
Monitoring in Europe, 2012). This creates the conditions for effective production of
biodiesel. That is why the EU is the world leader in production and use of biodiesel.
Significant volumes of raw materials and readymade biodiesel are also imported,
however.
Economic encouragement. The world practice shows that using alternative fuels is
attractive either because of lower cost, or because of economic incentives. Examples
of the first direction are compressed natural gas (CNG) or bioethanol in Brazil.
Energy density of ethanol is approximately 30% less than that of petrol.
Therefore, to ensure the economic attractiveness the price of biofuel should also be at
least 30% less than petrol price. Today, this condition is fully satisfied only in Brazil
due to favorable climatic conditions for sugar cane. Cheap raw materials allow pro-
ducing bioethanol with low production costs – 0.25 USD/l (Fay, 2013).
However, in most cases, the production cost of biofuels and synthetic fuels are
higher than that of conventional fuels. That is why the following economic incentives
are important:
- reduction of the excise tax;
- tax credit;
- compensation of investment costs at alternative fuel plants;
- quotas for biofuels consumption;
- environmental payments;
- subsidies to producers of bioenergy raw materials.
Their use helps increase biofuels consumption. For example, in Germany,
biodiesel consumption reached the record levels (Figure 3). First of all, to bring bio-
fuels to the market it is necessary to apply a reduced excise tax, and further they use
quotas and support for producers of bioenergy raw materials (EBB, 2014; Federal,
2003, 2005, 2011; VDB, 2011). As can be seen in Figure 3, the reduction of financial
support has resulted in a decline in biodiesel production.
3,5 2500
Annual consumption of biofuels, mln t
3,0
exemption of excise, mln EUR
2000
2,5
1500
2,0
1,5
1000
1,0
500
0,5
0,0 0
2004 2005 2006 2007 2008 2009 2010
Biodiesel consumption Bioethanol consumption exemption of excise tax
35
30
25
20
15
10
5
0
gasoline
CNG
propane
diesel
85
20
In accordance to "Energy Independence and Security Act of 2007" there are the fol-
lowing main targets (Energy Independence and …, 2007):
• by 2022, the annual use of 105 mln tons of renewable fuel, which amount to
20% of the current consumption motor fuels in the United States. Of these, 60% (64
mln tons) is supposed to be the second generation biofuels;
• increase fuel filling stations E85 by 5% each year to the point when 50% of all
gas stations can sell fuel E85;
• Automakers are required to increase the production of flexible fuel vehicles
(FFV) 10% per year to achieve 100% release of these machines.
4,0
3,5
Price, USD/(gas gallon)
3,0
2,5
2,0
1,5
28.04.2007 09.09.2008 22.01.2010 06.06.2011 18.10.2012 02.03.2014 15.07.2015
gasoline 85 CNG
Figure 5. History of motor fuels prices in the United States, compiled by the
authors on the basis of (Clean Cities Alternative Fuel Price Report, 2015)
In some countries in the EU, high excise taxes on motor fuels are applied. They
reach on average 466 EUR/t for gasoline and 375 EUR/t for diesel. This allows form-
ing an economically attractive price for alternative fuels by regulating the rates of
excise taxes.
A number of countries have large reserves of crude oil and pursue the policy of
low prices for motor fuels inside the country (Figure 6) (The Statistics Portal, 2014).
Naturally, this does not stimulate the development of alternative energy sector.
On the contrary, a country where fossil energy resources are scarce, but there is
a clear energy strategy, production of alternative fuels is developing rapidly.
As for Ukraine, since 2015 the alternative fuel 95 eco+ is being sold. It contains
ethanol, and its price is 18.99 UAH/l (as of October 2015). Noteworthy comparison,
the a price for A-95 is 20.99 UAH/l.
10
9,25
9
7
Price, USD/gallon
4
3,24
2,93
3
2 1,42
1 0,45
0,04
0
Venezuela Saudi Arabia Iran USA Russia Norway
Figure 6. Gasoline price in some countries (October 2014)
(The Statistics Portal, 2014)
Encouraging the use of gaseous motor fuels. To encourage the use of gaseous fuels
such as natural gas and especially biomethane the reduced tax rates are applied. For
example, in the Baltic States biomethane is taxed at zero rate, and natural gas is taxed
significantly lower than fossil fuels (Figure 7) (Benjaminsson, 2013).
There is an interesting experience in Sweden concerning the encouragement use
to alternative fuels. It covers all areas – from investment in fuels to environmental
charges (Benjaminsson, 2013):
- investments in production of biofuels;
- reducing income taxes;
- lack of parking fees;
- government awards for eco-friendly cars;
- reducing taxes on gas-cylinder cars.
For example, new environmentally friendly cars are exempt from taxes for
5 years. For comparison, annual environmental payments for diesel cars are
460 EUR, and for gasoline cars – 230 EUR.
Construction of new biogas and biomethane plants gets investment grants rang-
ing from 20 to 30% of the total costs (Benjaminsson, 2013).
Today China People Republic ranks #1 in the world by biogas production (15 bln
m3 per year) (Li, 2014).
Ukraine also has some experience in biogas production. But in Ukraine renew-
able gaseous fuel is usually used for co-generation. For example, JSC "Danosha" pro-
duces 13,000 m3 of such fuel per day. It can be used as a motor fuel.
Natural gas is a widespread motor fuel. In the world there are more than 22 mln
natural gas vehicles. They consume more than 2 bln m3 of gas monthly. There are
some factors influencing its use in different countries:
- reserves on gasfields;
- prices;
- availability of gaseous fuels;
- infrastructure around refueling stations.
8
6
Fuel tax, EURct/kWh
0
Sweden Norway Finland Germany Poland
gasoline diesel fuel CNG
Figure 7. Tax rates on fuels in the selected Baltic States (Benjaminsson, 2012)
Russia has the biggest in the world reserves of natural gas. However, there are
only 90,000 natural gas vehicles in the country. The main reasons for this are large
areas of the country as such (and therefore, often long distance between destination
points) and cheap petroleum. This makes it difficult to develop necessary infrastruc-
ture. The same situation is observed in the USA.
Conclusions. Development of the biofuels market in the world is dictated by the
reduction in conventional petroleum energy resources, and drastic environmental
degradation. These reasons led to stable growth in production of alternative fuels
including biofuels.
Provision of energy resources in any state can be carried out in two directions.
First, economically developed countries (with relatively low self-sufficiency in
primary energy resources) cover their deficit by means of imports. Sufficient financial
resources allow stimulating the use of all kinds of alternative motor fuels.
Second, countries with underdeveloped economy, due to lack of funds, use the
strategy of self-limitation of energy consumption and alternative energy self-suffi-
ciency. They are developing alternative fuels, which are cheaper than conventional
ones. This way is very much preferable for Ukraine.
Currently, the most widespread alternative motor fuel is compressed natural gas
as it is the cheapest fuel.
To intensify biofuels use in Ukraine it is necessary to concentrate on the actions
which do not require budget financing:
- to stimulate the use of flexible fuel vehicles;
- to apply effective excise tax exemption for biofuels;
- state regulation must realistically consider the applicable volume of renewable
fuels.
Taking into account that Ukraine is striving for the EU, the legislative basis for
alternative fuels use has to be harmonized with the EU legislation. This implies
Ukraine should initiate the second generation of biofuels production.
Since Ukraine already has experience of biogas production it is expedient to
stimulate the use of biogas (biomethane) as a motor fuel.
Prospects for further research is to investigate the synergy effect from reducing
impact of excise duty on biofuels, which concerns import substitution, strengthening
energy independence of the state, improving trade balance etc.
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